Revenue confirms claims of almost €40m were made under the Charities VAT Compensation Scheme
Today (16/08/2019), Revenue confirmed that over 1,100 claims, totalling almost €40m, were made by charities under the Charities VAT Compensation Scheme.
The scheme, which was announced as part of Budget 2018, aims to reduce the VAT burden on charities and to partially compensate them for VAT paid in the day to day running of their activities. The scheme started in 2018 and applies to VAT paid on qualifying expenditure on or after 1 January 2018.
To avail of the scheme, charities can submit one claim per year, which should relate to VAT paid on qualifying expenditure in the previous year only. For example, VAT paid on qualifying expenditure in 2018 can be claimed between 1 January and 30 June 2019. The fund for the scheme is capped at €5m per year. Where the total amount of claims received in any year exceeds the capped amount, charities will be refunded on a pro-rata basis.
Commenting on the scheme, Teresa Hearty, manager in Revenue’s Charities Unit explained:
“Revenue accepted claims under the Charities VAT Compensation Scheme, in respect of eligible VAT paid in 2018, between 1 January and 30 June 2019. During this period, over 1,100 timely claims amounting to almost €40m were made by charities. Of these claims, 61% were received from charities supporting the community, 16% from religious charities, 15% from charities supporting education and 8% from charities involved in the relief of poverty.”
Ms Hearty added:
“The closing date for submission of 2018 claims has passed and Revenue is now undertaking a risk-based claims review process in respect of the scheme. This review process is ongoing and has identified some incorrect claims. The main error relates to the inclusion of public funding in the amounts represented in the claim as qualifying income. However, the scheme only entitles charities to refunds of VAT paid having regard to their level of non-public funding. Where invalid amounts, or other errors, are identified, Revenue will contact the relevant charity to explain the reason why the overall claim will be reduced and the elements of the claim amount that do not qualify.”
Ms Hearty also confirmed that:
“the value of the VAT claims submitted by charities in respect of 2018 exceeds the annual fund cap and any refunds due will be paid to charities on a pro-rata basis. This means that if all the claims submitted totalling almost €40m are fully valid, having regard to the fund cap of €5m, each charity would receive approximately an eight of their claim back by way of a VAT refund.”
Commenting on when charities may expect their refund under the scheme, Ms Hearty outlined that:
“allowing for the completion of the claims review process, Revenue expect to make refunds to qualifying claimants on a pro-rata basis during October and November.”